Canadian airlines to feel the pinch of Boeing 737 Max 8 production suspension - InfoNews

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Canadian airlines to feel the pinch of Boeing 737 Max 8 production suspension

Boeing Co.'s suspension of the 737 Max production line means further headaches for Canadian airlines, which were counting on the grounded jetliner to carry more passengers and boost profit margins. An Air Canada Boeing 737 Max 8 aircraft arriving from Toronto prepares to land at Vancouver International Airport, in Richmond, B.C., Tuesday, March 12, 2019.
Image Credit: THE CANADIAN PRESS/Darryl Dyck
December 17, 2019 - 3:30 PM

Boeing Co.'s suspension of the 737 Max production line will mean further headaches for Canadian airlines, which were counting on the grounded jetliner to carry more passengers and boost profit margins.

The Chicago-based aerospace company announced Monday that it will temporarily stop producing its grounded 737 Max jet starting in January as it struggles to get approval from regulators to put the plane back in the air.

The manufacturing delay is likely hampering expansion plans at Air Canada, WestJet Airlines Ltd. and Sunwing Airlines Inc., said Robert Kokonis, president of Toronto-based consulting firm AirTrav Inc.

"WestJet had to suspend a bunch of schedules and reroute flights. Air Canada as well," Kokonis said of the turbulence so far this year.

"This is causing commercial pain. It’s crimping expansion. It’s crimping growth."

Boeing's marquee aircraft was slated to make up one-quarter — 36 planes — of Air Canada's narrow-body fleet by the end of this year, with 14 more initially scheduled to arrive in 2020.

READ MORE: Halting 737 Max production will hit suppliers, airlines

FILE - In this March 27, 2019, file photo, a worker enters a Boeing 737 MAX 8 airplane during a brief media tour of Boeing's 737 assembly facility in Renton, Wash. On Monday, Dec. 16, shares of Boeing are falling before the opening bell on a report that the company may cut production of its troubled 737 Max or even end production all together.
FILE - In this March 27, 2019, file photo, a worker enters a Boeing 737 MAX 8 airplane during a brief media tour of Boeing's 737 assembly facility in Renton, Wash. On Monday, Dec. 16, shares of Boeing are falling before the opening bell on a report that the company may cut production of its troubled 737 Max or even end production all together.
Image Credit: (AP Photo/Ted S. Warren, File)

The grounding, implemented in March after a pair of fatal plane crashes within five months, forced Air Canada and WestJet to cancel some routes and lease less fuel-efficient aircraft. The two airlines have scrubbed the jetliner from their schedules until February.

WestJet had been expecting four more Max 8s by 2021.

"Once the aircraft is approved for re-entry into service by all relevant regulatory bodies, WestJet will work with Boeing to review future deliveries," said spokeswoman Lauren Stewart in an email.

Air Canada and WestJet did not respond immediately to questions on whether discussions over compensation from Boeing were progressing.

Southwest also announced last week it had reached a confidential compensation agreement with Boeing for a chunk of the projected US$830-million hit to its operating income in 2019 due to the grounding.

Monday's suspension rippled through the market, triggering concern among suppliers and prompting Southwest Airlines to push back plans for the Max 8's re-entry into service until April. Last week American Airlines removed the Max from its schedule until April 7, a month later than previously announced.

While Air Canada covered more than 95 per cent of planned flying in its latest quarter, it was forced to cancel some routes and lease a pair of Airbus A330s on top of lease extensions for Airbus A320s and Embraer 190s, all of which are less fuel efficient than the Max 8.

Twelve undelivered Max aircraft now sit on Boeing lots, delaying Air Canada's hiring of at least 350 pilots — the company currently has about 400 Max pilots, relegated to training for the time being. Fourteen more Max 8s slated for delivery in the first half of 2020 may now be pushed back.

In August Sunwing finalized its schedules through to mid-May 2020, excluding the 737 Max from all routes.

— With files from The Associated Press.

This report by The Canadian Press was first published Dec. 17, 2019.

Companies in this story: (TSX:AC, TSX:WJA)

News from © The Canadian Press, 2019
The Canadian Press

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